The Fed could get a Donald Trump makeover

What does Janet Yellen think about Donald Trump?

Yellen had a chance to respond to criticism from the president-elect when she holds a press conference following the Federal Reserve's interest rate decision Wednesday. The Fed raised rates for the first time in a year.

She didn't address Trump's specific attacks on her, but she did say that fiscal stimulus could affect the economic outlook -- even though it was too soon to say just what Trump's specific policies could do to help boost growth.

"I am not trying to provide advice to the new administration," Yellen said, adding that the Fed's staff has been in touch with the Trump transition team.

In other words, she took the high road.

But Yellen may not have to deal with Trump for that much longer. Yellen's term as Fed chair ends on February 3, 2018. It's unclear if she would want to stick around for another term -- assuming that Trump even wanted her to stay.

In fact, Trump could drastically shake up the Fed's Board of Governors over the next few years. There are currently two vacancies on the board, which helps to set short-term interest rates and also has a role supervising the nation's banks.

Steven Mnuchin, Trump's pick to be Treasury Secretary, said in a Fox Business interview earlier this month that filling the two current vacancies will be a priority in the new administration.

Why does this matter? The Fed has had a far more prominent role over the past decade, largely because of the 2008 financial crisis. In addition to cutting rates to near zero, the Fed helped with the bailout of big banks in the wake of the market meltdown.

It also bought trillions of dollars of bonds, mortgage-backed securities and other assets in order to keep long-term rates low.

Supporters of these policies argue they prevented the market from plunging further and kept the economy from entering a depression.

But critics -- including Trump -- maintain the actions of the Fed set the market up for another bubble and that low rates haven't actually helped consumers or pushed businesses to create more jobs since banks have been less willing to lend.

So how different could the Fed look in a Trump administration?

The Senate has to approve new Fed board members -- and there would appear to be a better chance of that happening smoothly now that a Republican is set to move into the White House.

There is also speculation that Fed board member Daniel Tarullo, a Democrat whose term won't expire until January 31, 2022, could step down before then. That would mean Trump could have another chance to appoint a new Fed member.

And the term of Fed vice chair Stanley Fischer, an appointee of President Obama, expires on June 12, 2018. Unless Yellen gets a second go as Fed chair, it seems unlikely that Fischer will be asked to serve a second term.

Yellen was bashed by Trump repeatedly during the presidential campaign for keeping interest rates too low.

He accused her of having a political motivation for doing so -- to help Hillary Clinton's chances of getting elected as well as help the legacy of Obama, who appointed Yellen as Fed chair. Ironically enough, Trump is now going to get what he asked for -- a rate hike.

But the Fed is actually an independent body, with no official ties to the White House or Congress.

The Fed chair often testifies in front of Congress about the economy, but they cannot be fired by lawmakers.

The president can remove a Fed member for cause, i.e. if there was actual malfeasance. But presidents can't get rid of Fed members merely because they have a disagreement about monetary policy.

So Trump will have to coexist with Yellen until early 2018. But what happens after that?

There is speculation Trump could appoint Stanford professor John Taylor, Columbia Business School dean Glenn Hubbard, or Greg Mankiw, former chair of the Council of Economic Advisers under President George W. Bush, to succeed her.

All are considered to be more conservative economists than Yellen.

There are also 12 regional presidents of Federal Reserve Banks throughout the country. The boards of those banks choose their president.

The president of the Federal Reserve Bank of New York has a permanent spot on the Fed's rate-setting Open Market Committee. Four of the other 11 Reserve Bank presidents serve a one-year term on a rotating basis.

But the president of the United States gets to pick the other members of that powerful group.

And since Trump is likely to have the opportunity to appoint at least four, and perhaps five, of them, he'll have nobody to blame but himself if the Fed starts doing things in 2018 and 2019 that he doesn't like.